Vocational education: how the shonks and shysters took control

Billions of taxpayer dollars have pumped up the profits of private companies that often have little experience in education.

By Michael Bachelard

September 25, 2015 — 1.59pm

To put the rorting in Australia's vocational education system in context, consider this.

Signing up to Phoenix Institute for a 10-month business diploma will cost a new student $18,000. This course, which is delivered online at a college with no reputation, costs $8000 more than a year's on-campus tuition at the School of Medicine at Melbourne University.

Arthur and Jacinda Eastham from Euroa have intellectual disabilities and live in public housing. They were recently signed up to diplomas they can't complete.Credit:Simon O'Dwyer

In both cases the learner finishes the year with a debt to the Commonwealth. But the Melbourne University student is significantly more likely to have been given something of value, and is much more likely to eventually repay the debt.

While enormous concern has been expressed over the federal government's plan to deregulate university fees, few have noticed the even more radical deregulation that has taken place in vocational education, and the epic level of fraud that has followed.

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Here, prospective students are much more likely to be unemployed, less educated, older and poorer. They need training to fill the demands of industry for skilled workers.

Instead, though, many are being lured by door-to-door salesmen, fake job advertisements or shopping mall spruikers into dubious online courses in private colleges run by people who are not educators.

The two issues are cost and quality.

The price of each course is up to the college to determine. The only limit is a lifetime vocational learning limit per individual of $93,000. The spectre of $100,000 degrees is one reason the Senate has blocked university deregulation, but in vocational education, debts of this size are already a possibility.

The Commonwealth spends this money upfront, handing it to the colleges. It expects to see it repaid through a HECS-style delayed repayment scheme called VET FEE-HELP.

As for quality, unlike in the heavily regulated university sector, there is no minimum course length, no standardised testing at the end, and precious little oversight of the colleges.

And the industry is growing exponentially.

This year alone, new students are likely to sign up to $4 billion worth of vocational courses – triple the cost of a year ago – most of which is flowing to a plethora of new, small colleges.

The industry, by design, is "demand driven". But it's colleges, not students, driving the demand. They employ an army of salesmen (known euphemistically as "brokers") who can earn millions in profits from taxpayer subsidies.

The dodgy brokers, such as some of those working for Melbourne's Phoenix Institute, specifically target people living in public housing, the intellectually disabled, the drug addicted and non-English speakers.

They offer a free laptop as an incentive to get the signature of a new "student", then fill out the literacy and numeracy test themselves (or coach the client through it). A number of former salesmen have confirmed to Fairfax Media that, at Phoenix at least, most "students" are signed up to two courses each, generating $36,000 in revenue for the college's publicly listed owner, Australian Careers Network (and a $36,000 cost to the government).

Euroa couple Jacinda and Arthur Eastham, who were sold a course by a Phoenix Institute salesman.Credit:Simon O'Dwyer

The salesman then comes back to the house to sit in the room and coach the new student as the college makes its post cooling-off period confirmation phone call.

Phoenix said through a spokesman that it was cracking down on rogue salesmen, had sacked a number of agents since February and reported them to authorities.

"Instances of poor broker behaviour are historical," the spokesman said.

At its worst, this is not about education. It's about money. Many of these students will never study anything and never repay their debt to the Commonwealth taxpayer.

However, those who get their lives together and start earning more than the threshold amount (set for VET FEE-HELP at the same level as HECS, or $54,126 this year) may be surprised to find a large education debt against their name.

The system is also not working for employers. Australian Industry Group chief executive Innes Willox​ says his members, who employ large numbers of vocationally trained students, have been "concerned for some time with the poor outcomes and worrying growth of low-quality providers".

"Three months ago I was on a panel in a conference in the city," the Australian Chamber of Commerce and Industry's training spokeswoman Jenny Lambert says. "There were 400 people in the room, all involved in training, and I asked, 'Does anyone think we've got a better system today than 10 years ago?' Not one person put up their hand."

Honest providers are also worried.

Open University chief executive Paul Wappett​ says his institution offers an online diploma of project management for $5000, while others are sucking $16,500 from the government – "triple what we think is good value" in return for "the same qualification, same curriculum, same national training package".

He's concerned that the whole industry, and education itself (which is now Victoria's biggest export industry) will be tainted by the excesses. He encounters students who are suspicious about whether the course they are being offered is genuine or just another sham.

The National Centre for Vocational Education Research is conducting a major research project for the government. A leaked copy of the report's summary said the number of students funded by VET FEE-HELP had tripled since 2012, but that the students in the system were "highly unlikely to complete their training".

How technical education came to be like this is a story of ideology and government failure at both national and state levels.

The first moves came under the Keating government's competition reforms in the 1990s, which opened the TAFE sector up to private competition, and its most enthusiastic proponent was the Kennett government in Victoria. The belief was that private know-how would render the system more flexible and responsive to the needs of employers.

By current standards, it was baby steps.

According to the Australian Education Union's Pat Forward, more changes were made in Victoria under the Bracks and Brumby governments, which the Napthine government embraced. One consequence was to make it became much easier to run a college.

"You or I could have started one," says Bruce Mackenzie, who is leading Premier Dan Andrews government's review into the state's troubled sector.

"It was open slather. In 2011 and 12, you could get as much money as you wanted if you could enrol students in any course that was funded by the government. There were 1400 of them.

"Who operates without a budget? It was insanity."

When the cost to Victorian taxpayers hit $1.5 billion, the state government started to rein it in, but by that stage, federal Labor had caught the deregulation bug.

Julia Gillard's 2012 national funding agreement introduced a HECS-style loan scheme for diploma-level courses. Lower level courses, Certificates I to III, would get Commonwealth funding on only condition that state governments allowed private providers to compete with TAFEs.

"Between them, these policies rapidly opened up the market ... It was like a honeypot, it was just massive," Forward says.

There was no standard price and virtually no quality assurance for courses that are now overwhelmingly delivered online. Winning approval to run a college was easy, as was registering for public subsidies. Far from being responsive to the needs of business, private colleges flood the market with the most popular courses, because they are the most lucrative.

Education Minister Senator Simon Birmingham is committed to deregulating universities, it would find it politically difficult to re-regulate the vocational training sector.Credit:Andrew Meares

"We are talking about the transfer of billions of dollars from the public purse to the profits of private companies who are often quite new to the education game. The blowout to the Commonwealth budget is simply unacceptable."

In the state scheme, the (perfectly legal) trick is slightly different. Colleges sign people up to a short, cheap course in areas such as aged care, childcare or IT, pretend it's a Certificate III qualification, and reap the full government subsidy. Colleges make big profits for little work, and their certificates are not worth the paper they're printed on.

To try to cage these untamed animal spirits, a state government inquiry, a Senate inquiry and an Australian Competition and Consumer Commission investigation are now under way. The federal government has given a big boost to the industry policeman, the Australian Skills Quality Authority, which now costs $60 million a year and received more than 1500 complaints last year.

Malcolm Turnbull's newly appointed Education Minister, Simon Birmingham, is well aware of the problems. After Fairfax Media outed Phoenix Institute, he talked tough, threatening to shut it down. But this scandal goes well beyond a single college.

The Phoenix Institute of Australia.

As assistant minister in the Abbott government, Birmingham put new controls in place in March, outlawing the offer of laptops or iPads to potential students as incentives. This was immediately undercut by the salesmen, who simply now (legally) give out "loan devices" with no intention of reclaiming them.

More reforms will come into place in January. The most important means the Commonwealth will no longer pay a lump sum up front to colleges for the whole cost of the course. Payments will come in stages and will be tied to students' results.

But the delayed implementation – which Birmingham said would allow time for the colleges to "alter processes and systems" – means they are making hay while the sun shines. The shonks and shysters have already become millionaires and now have time to think of fresh ways to get around the law.

Education salesman Gagan Sachdeva and his new Porsche.Credit:Facebook

What's needed is tighter regulation. But while the Liberal government is committed to deregulating universities, it would be politically difficult for the freshly minted Education Minister to re-regulate their poorer cousin.

"It's easy to clean it up. You say 'Here's the maximum fee, here's the minimum hours, and here's a test at the end'. That's the ideal," the Victorian government's inquiry chief Mackenzie, a former TAFE chief executive, says.

"The problem, I think, is that ideology gets in the way of proper practice."